PRIME GLOBAL FORECAST 2019 - RESEARCH - Knight Frank
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RESEARCH PRIME GLOBAL FORECAST 2019
A NEW CHAPTER
The economic landscape is changing as monetary policy normalises
and there are geopolitical jitters, but with risk comes opportunity.
According to our Prime Global Cities 2019 as local buyers start to identify now been fully absorbed, suggesting
Index, which tracks the movement in buying opportunities. activity could strengthen once political
prime prices across 43 cities worldwide, uncertainty in relation to Brexit starts to
Of the 15 cities, Sydney, London and recede. In New York, economic growth
luxury residential prices are now
New York sit mid-table with forecasts of and wealth creation are starting to
rising at their slowest rate since 2012.
0%-2% growth. A lack of new supply is cancel out the high completion rates
The proliferation of property market
supporting Sydney’s prime market. In observed in the prime market over the
regulations, the rising cost of finance,
London, changes to stamp duty have last few years.
uncertainty surrounding Brexit and in
some markets, a high volume of
new supply, is weighing on prime prices.
More muted growth is the main story Knight Frank’s Prime Global Cities Index is still rising but
behind our 2019 forecast. In 2018, the its rate of growth is slowing
gap in annual price growth between the FIGURE 1
strongest and weakest-performing markets Prime price performance Indexed, 100 = Q1 2006 vs.12-month % change
will end the year at 25 percentage points, in
2019, we forecast this figure will shrink to 180 15
12-month % change Prime Global Cities Index*
16 points as the outliers start to converge. 12
160
Of the 15 cities that we forecast, the key 9
140
European cities of Madrid, Berlin and 6
Paris, lead our forecast for 2019 with 120 3
growth of 6%. Still positive, but marginally 100 0
down on 2018, the normalisation of -3
80
monetary policy, weaker economic -6
growth and a fragile political landscape 60
-9
post-Brexit will influence demand, but
40 -12
the relative value of these cities remain
2006 Q1
2006 Q3
2007 Q1
2007 Q3
2008 Q1
2008 Q3
2009 Q1
2009 Q3
2010 Q1
2010 Q3
2011 Q1
2011 Q3
2012 Q1
2012 Q3
2013 Q1
2013 Q3
2014 Q1
2014 Q3
2015 Q1
2015 Q3
2016 Q1
2016 Q3
2017 Q1
2017 Q3
2018 Q1
a key driver.
Markets that have been the recipients
Source: Knight Frank Research
of new macro-prudential measures in
2018, such as Hong Kong and Singapore,
will slip down the rankings as buyers Why? (1) (2) (3) (4)
and developers adjust to the new taxes.
Vancouver, which also falls into this
bracket, is the exception to the rule. Our
weakest prime market in 2018, largely as Property Rising cost Strong rates Geopolitical
market of finance of supply (in landscape
a result of hikes to its foreign buyer tax
regulations some markets) (trade disputes,
and stamp duty in early 2018, Vancouver Brexit, Emerging
is expected to see prime prices stabilise in Market volatility)
2 RESEARCH KNIGHT FRANKPRIME GLOBAL FORECAST 2019 RESIDENTIAL RESEARCH
PROPERTY REGULATIONS
IN 2018 PRIME GLOBAL FORECAST 2019 EVENTS 2019
Knight Frank’s analysts provide their prime price forecast for 2019, taking account of the latest economic indicators, supply, demand and UK: Foreign buyer SDLT consultation
Vancouver: 20% tax on starts Jan 2019. UK leaves EU on
foreign buyers and higher
sales trends 29 March 2019.
stamp duty
1.0%
LONDON Dubai: New five to 10-year investment
0.0% visas and five-year retirement visa for
Singapore: Additional Buyer NEW YORK 6.0% 55 yrs+.
Stamp Duty increased for 2.0% PARIS
foreign buyers and developers LOS ANGELES
1.0% Mumbai: Developer tax on unsold
GENEVA -2.4% -10.0%
inventory.
Hong Kong: Vacancy tax for 3.0% DUBAI
developers with apartments 6.0% -5.0% HONG KONG Hong Kong: Stamp duties unlikely to
VANCOUVER MUMBAI
unsold for 6 months+ (proposed) 6.0% BERLIN change but loan-to-value ratios could
MADRID be relaxed.
New Zealand: Ban on 5.0% 0.0%
MIAMI US: The full implications of State and
overseas buyers purchasing SINGAPORE Local Tax (SALT) deductions will be
existing homes (can still
understood (Apr 2019 tax deadline).
purchase new-build properties)
Malaysia: Stamp duty
increased FUTURE DIRECTION
How will demand, supply and sales
volumes change in 2019?
RATE RISES IN 2018 1.0%
MELBOURNE Rise slightly Remain the same
01 Jan 2018
US Rise significantly
30 Nov 2018 Fall slightly
PRIME PRIME PRIME
UK
SALES DEMAND SUPPLY
Berlin
CANADA
2.0%
SYDNEY Dubai
TURKEY
Geneva
HONG KONG
Hong Kong
0 5 10 15 20 25
Base Rate (%) London
Los Angeles
FIGURE 2
Prime price performance over the last decade Ranked by 10-year % change Madrid
Berlin Vancouver Sydney Melbourne Miami Hong Kong London Los Angeles Mumbai Paris Madrid Dubai Singapore Geneva New York Melbourne
Five-year 47.6% 52.7% 58.7% 46.2% 30.0% 11.4% -2.2% 29.1% 8.0% 7.9% 39.5% 1.3% -2.0% -17.4% 17.2%
% change Miami
(Q3 2013-
Q3 2018) Mumbai
New York
Paris
Singapore
10-year %
Sydney
change
2.50 (Q3 2008- Berlin* Vancouver Sydney Melbourne Miami Hong Kong London Los Angeles Mumbai Paris Madrid Dubai* Singapore New York
Vancouver
Q3 2018) 118.3% 101.5% 60.0% 58.8% 49.9% 39.4% 33.7% 33.4% 28.5% 26.3% 25.6% 24.8% 19.8% Geneva 15.2%
1.75
HONG
16.9%
KONG *Data corresponds to Q1 2009-Q3 2018
3 RESEARCH KNIGHT FRANKPRIME GLOBAL FORECAST 2019 RESIDENTIAL RESEARCH
RISK
MONITOR
How important will the following
10
10
factors be to your city’s prime
residential market in 2019? 9
Our global research teams share
their views as to which factor or
event, assuming it were to occur, 9
would influence their luxury market
the most. TOP RISKS BY
The score reflects the average for WORLD REGION
all 15 cities (high = most important,
low = least important).
9
Europe
CHANGES TO PROPERTY 1. Change in national
MARKET REGULATIONS government
GLOBAL ECONOMIC SLOWDOWN 9 2. Brexit
LOCAL ECONOMIC SLOWDOWN
Asia Pacific
GLOBAL TRADE DISPUTES 1. Change to property
CURRENCY VOLATILITY
8 market regulations
2. Local economic
CHANGE IN GOVERNMENT
slowdown
GEOPOLITICAL CRISES
8 North America
COMMODITY PRICES 1. Global trade
disputes
EMERGING MARKET VOLATILITY
2. Oversupply of
OVERSUPPLY OF LUXURY HOMES 8 luxury homes
US FED RESERVE RATE RISE/S
Middle East
BREXIT 8 1. Commodity prices
2. US Federal
7 Reserve
rate hikes
5
Source: Knight Frank Research
OPPORTUNITIES & DRIVERS Below we highlight what motivates prime
buyers and what is fuelling demand globally
1 Robust global
economic forecast
3 Wealth creation
hotspots
5 Lifestyle remains
a key motivator
The IMF forecasts 3.7% The number of high net worth ✔ Security
growth in 2019 and 2020. individuals with US$5m+ in net ✔ Education
assets is forecast to rise by 43% to ✔ Tax
3.6 million by 2022, according to
Knight Frank’s Wealth Report. Asia
is forecast to see a 61% increase
over the same period.
2 The world is getting
smaller and property 4 Value still to be found
For some, where currency and
6 Taking stock
The extent to which prime markets
remains highly rated price performance combine, are influenced by stocks, shares
asset class discounts exist. A Euro and and commodities, in particular oil,
In 2017, 32% of all commercial USD buyer purchasing in prime varies globally. There is a close
and residential transactions (by central London in Q3 2018 have correlation between the Hang Seng
volume) involved cross-border seen a 29% and 25% discount Index and Hong Kong’s prime
purchases, up from 25% during compared with the market’s residential market, whilst oil prices
2009-2011 (Real Capital Analytics). peak in August 2015. are influential in Dubai. Knowledge
of local drivers is critical.
KNIGHT FRANK RESEARCH 5FOR RESEARCH ENQUIRIES:
TRENDS TO MONITOR
Knowing what to track, and when to act can be the difference
between a low or high return on your investment.
Market fundamentals such as demand 4 Detachment of ultra-prime
and supply indicators as well as political
The US$25m+ market saw a total of 155
stability, quality of life and accessibility
transactions in six leading urban markets Liam Bailey
are on the basic checklist for most prime Global Head of Research
in the 12-months to August 2018, up 13%
buyers. Below, we go one step further +44 20 7861 5133
year-on-year. We expect more cities to
to highlight some of the trends we think liam.bailey@knightfrank.com
enter this select club with San Francisco,
deserve closer attention over the next year:
Chicago, Dallas, Beijing and Shanghai all
1 Follow the tech vying for contention.
The knowledge economy – universities, 5 Greater synchronicity
start-up industries and technology parks –
The property cycles of first-tier world cities
will be key drivers of future growth.
are more in sync as their financial markets
2 USD all powerful? have become more integrated. Low interest
Although USD-denominated buyers are rates, greater institutional investment and Kate Everett-Allen
enjoying stronger purchasing power rising wealth have left their mark on most Global Residential Research
abroad, we’ve yet to see a strong flow prime markets but it also means policy +44 20 7167 2497
of outbound capital into prime residential responses in one market may have broader kate.everett-allen@knightfrank.com
markets. 2019 may be the year USD ramifications globally.
buyers increase their market share, or
6 Multi-tiered markets
it may be we see it being invested closer
MEDIA ENQUIRIES:
to home. A city’s housing market is far from
homogenous. Whether driven by policy,
3 Demographics dictate supply or demand, we are seeing stronger
In established western markets, non- mainstream sectors in some cities (Hong
traditional real estate sectors will be Kong, London) and stronger prime
under the spotlight – student markets in others (Sydney). The divergent
accommodation, retirement living performance of different market tiers will
and build-to-rent will outperform the become more evident as affordability Astrid Recaldin
wider market. constraints deepen. International PR Manager
+44 20 7861 1182
astrid.recaldin@knightfrank.com
NEW BUYER TRENDS
Which buyers were responsible for the largest rise in enquiries in your city in 2018?
Selected cities
PARIS DUBAI MADRID SYDNEY SINGAPORE
Middle East, Europe, US, France, Expats China, Australia,
US, China China Germany, (with USD) SE Asia
Middle East
Important Notice
© Knight Frank LLP 2018 – This report is published
RECENT MARKET-LEADING RESEARCH PUBLICATIONS for general information only and not to be relied upon in
any way. Although high standards have been used in
the preparation of the information, analysis, views and
projections presented in this report, no responsibility or
liability whatsoever can be accepted by Knight Frank LLP
RESEARCH RESIDENTIAL RESEARCH Branded Residences Report 2019
1
UK RESIDENTIAL for any loss or damage resultant from any use of, reliance
MARKET
The global perspective on prime property and investment
Branded
FORECAST
Residences
Report
2019 on or reference to the contents of this document. As a
general report, this material does not necessarily represent
2018 Global Sales Focus
the view of Knight Frank LLP in relation to particular
THE WEALTH REPORT 2018
properties or projects. Reproduction of this report in whole
or in part is not allowed without prior written approval of
Knight Frank LLP to the form and content within which it
ALTH ADVISORY
property markets
appears. Knight Frank LLP is a limited liability partnership
es market-leading research
e to our global private clients
perfectly.
registered in England with registered number OC305934.
2018
12th Edition
WEALTH TRENDS PRIME PROPERTY OUTLOOK
Cover: One Barangaroo, Crown Residences
Our registered office is 55 Baker Street, London, W1U 8AN,
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